In America Fortune 500 corporations pay 12.1 percent in taxes, on average, on their profits [source] versus the default rate of 34 to 35 percent that any small-to-midsize business (SMB) making over $335,000 USD per year in profit must pay. With corporate tax rates plummeting in half over the last three decades, individuals and SMBs in America are increasingly left to shoulder the difference.

However, it's important to remember the U.S. isn't the only country struggling with the increasingly parasitic nature of politically active corporations. Britain is currently grappling with similar issues.

American and domestic companies in Britain and other European Union states have been cleverly positioning their regional headquarters in the handful of member states with the lowest corporate tax rates.

For example Apple, Inc. (AAPL) made an estimated £6B ($9.50B USD) in Britain last year, but paid only £10M ($15.8M USD) in taxes. That astounding figure, which has many British natives grumbling, comes thanks to the British tax code's rule that largely exempts companies based in Ireland from paying British taxes.

Apple has installed its regional headquarters in Cork, Republic of Ireland. Thus it enjoys the low Irish 12.5 percent tax rate (which the British newspapers consider "ultra-low", but is ironically in line with the aforementioned current effective American rate for Fortune 500 firms), versus the 24 percent it would pay in Britain.

The Irish branch of Apple -- a subsidiary itself -- runs a series of shell companies that log British sales in "tax haven" regions like Ireland or the British Virgin Islands despite the fact that the physical point of sales is in Britain. Apple Retail UK Ltd -- one of these shell companies -- made a reported £500M ($791.8M USD) in 2010, but only paid £3.79M ($6.0M USD) in taxes.

Experts cited in a report by The Daily Mail estimate that of the $99.8B USD (£63B) Apple made globally in 2011, 10 percent of it came from the UK.

Apple's loyal legion dutifully lines up for the iPad launch in London. Apple is estimated to have to have only paid $15M USD in UK taxes, despite earning almost $10B USD from the island nation. [Image Source: Tim Ferguson/silicon.com]

This figure is hinted at in Apple's U.S. tax filings. While Apple pays well above the current hyper-evasive rate of the Fortune 500, it only paid an effective rate of 25.3 percent -- below the supposed tax rate of 35 percent. Apple credits this good fortune to "undistributed foreign earnings", which it plans to hold "indefinitely". Such commentary might draw greater scrutiny by auditors in the U.S., except that Apple wisely based its U.S. financial operations in Nevada -- a state known for a lax approach to tax enforcement.

Apple, which recently announced a dividend for shareholders, is hoarding $97.6B USD (£60B) in cash -- more money than the entire gross domestic product of Serbia. Valued at $590B USD (£370B), Apple is the world's most valuable company, and some experts it expect it to soon become the world's first company to be valued at a trillion USD.

The situation for Apple could soon be changing -- the U.S. Internal Revenue Service (IRS), has reportedly audited the company's 2007 to 2009 figures and has "suggested" "certain adjustments". Those adjustments could be in the form of forcing Apple to pay millions in unpaid taxes -- either to Britain's HM Revenue & Customs or to the U.S. IRS.

II. Apple is Not Alone, U.S. Companies Enjoying Field Day of Tax Evasion

While Apple draws the brunt of the scrutiny given that as the world's largest and most valuable corporation it is a beacon of corporatism, other American companies are following in a similar line.

Amazon.com, Inc. (AMZN) has placed its headquarters in the tiny European Union nation of Luxembourg -- the same nation where deceased North Korean tyrant Kim Jong Il reportedly sheltered his $4B USD fortune. Google Inc. (GOOG) -- makers of the world's most used smartphone operating system and the world's most used search engine -- based itself in Ireland and has subsidiaries in the Caribbean and Luxembourg for more tax dodging gains.

Google told The Daily Mail that this scheme -- which many would call "tax dodging" -- is necessary in today's corporate atmosphere, as responsibility to shareholders. States a Google spokesperson, "We have an obligation to our shareholders to set up a tax-efficient structure, and our present structure is compliant with the tax rules in all the countries where we operate."

Google also successfully dodged British taxes. [Image Source: Main Device]

In the U.S., Britain, and other wealthy nation states, change over such inequity is slow coming. After all, increasingly corporations are responsible of paying federal candidates' way into office -- regardless of their political affiliation. In office, these candidates inevitably look to serve their masters -- not the populous, but the corporations.

The quote is good and valid, I never said anything about Bufett's plan. Personally I think the plan is a smokescreen. Would the President support a plan that hurts those who paid to get him elected? Maybe on paper, but not on tax day after all the loopholes. I mean SMBs pay the same as corp.s right? *wink* *wink* *nod* *nod*

But even if it was for real I wouldn't support it. I'm a flat tax proponent. Taxing anyone at a higher or lower rate than anyone else is inherently unfair. That is my opinion on the matter.

I agree that a flat tax rate would be benificial.. (even here in Canada)I don't think it should be on your gross though.. rather your net profits for the year. Someone suggested a total flat tax no deductions and wow.. that would be scary for some of us..

Flat tax proponents are either unaware, or steeped in their rhetoric so much that they don't acknowledge some glaring issues with a flat tax. The biggest being that, in the end, it would be no more "fair" than the current system, and inequalities would still exist. It also wouldn't significantly reduce the complexity of the US tax code.

The 800 pound elephant in the room is the undisputed fact that the "rich" are absolutely shouldering the tax burden for the rest of us. By enacting a flat tax, you would actually be INCREASING the tax rate on all those that currently pay practically nothing in income taxes. 49% of all US households paid no federal income taxes at all.

And that's the problem with the "fair tax" concept. It's built on the false premise that the rich pay less taxes than everyone else. Which any rational person who can look at a IRS revenue graph/chart can tell you is a bogus statement. Once you understand that the top 10% earners pay 70% of the total tax burden, the problems with a fair tax become self evident.

If someone, you or Jason, can find me a source that explains how a flat tax would make everything all rosy for everyone, I would love to see it.

As a side note, we would all love to be paying less taxes. But for some reason it's easier to point at the "rich" and accuse them of not paying enough, instead of lobbying to have your own taxes lowered.

This stems from another false premise that in order for your taxes to go down, someone elses needs to go up. Pure absurdity.

Adjusted for inflation, Federal tax revenues have tripled since 1965. Despite tax cuts, revenues continued to grow. The rhetoric that we're in a tax crisis somehow is divisive class warfare tripe. The spending and budget is the problem, NOT tax policy.

If the Government can't make due with $2.15 trillion goddamn dollars from income taxes alone, let alone all the other revenues, than I don't know what to say to that. Honestly, it's mind boggling.

A flat tax (in my opinion) would simplify things overall. I would like everyone to be paying it though. Rich and poor alike. Oh sure, those living on government assistance would still get a pass.. but the rest wouldn't.

In the end though the wealthy would still land up shouldering the brunt of it. Why is that? Well, for one thing they'd probably have to pay more to those under them in order for those people to pay their fair share so that would mean they make less..

You can't get blood from a stone. What do you do about the impoverished? Jail them for not paying their taxes? They didn't die this year so they obviously must have at least made enough to buy food. At some point you have to make exceptions so that the system makes rational sense. The problem is that the current exceptions are slanted both towards both the very poor and the very rich.

I agree with you there... Its really not about the tax code to me. I think the rich should pay more as they benefit more from the American system.... But the problem is spending. WTF will it take to reduce federal spending.

I feel like our govt. is a shopping addict with a dead end job that has only so much income and 400,000 dollars in credit card debt and its increasing by 20 grand every month. Instead of stopping spending and figuring out what to cut they are off buying more crap they dont need every day, increasing hte monthly output to 30 grand as if that will help.

See I don't even know what that means. Do the rich benefit more from the military? The roads? The educational system? They already pay more in taxes anyway, that much is fact. But I don't understand this pervasive attitude that the rich are "benefiting" more than anyone else. It completely seems grounded in jealousy and class warfare. As if they don't really deserve to prosper because so many aren't, so we'll use the tax code to hammer them and make us all feel better.

quote: But the problem is spending. WTF will it take to reduce federal spending. I feel like our govt. is a shopping addict with a dead end job that has only so much income and 400,000 dollars in credit card debt and its increasing by 20 grand every month. Instead of stopping spending and figuring out what to cut they are off buying more crap they dont need every day, increasing hte monthly output to 30 grand as if that will help.

Totally agree. And this goes back to my beliefs on taxes. The Federal Government of today has largely transformed itself into a massive wealth redistribution service. It's NOT about the day to day running of a decentralized minimalist Government anymore. The more you give them, the more they simply throw away. And even that's not enough, so as you said, they need "credit".

These spending levels are simply not sustainable. I can't believe we're talking about changing the tax code before we address this spending issue.

"Do the rich benefit more from the military? The roads? The educational system? "

Yes, they do. Especially from the military. But I don't want to hijack this thread into that direction. I am not into class warfare and not into the notion that anyone is vilifying the rich. Its jsut this simple,they make more, they benefit more from the American financial system and should pay more. Not more than they do now, just more than the poor pay.

Someone here at Anandtech had a great tagline years ago. It went something like this.... "You don't see alot of wealthy people clammoring to become poor to take advantage of the tax benefits" Makes alot of sense to me.

Anyhow, yes, the spending has to stop. The scary thing is its not really in the narrative of any political campaigns on the national level. Where is the "massive spending cuts" party?

quote: Its jsut this simple,they make more, they benefit more from the American financial system and should pay more.

They already do. What are we talking about here?

quote: Yes, they do. Especially from the military.

You're going to have to explain this one to me. The rich benefit MORE from the military than the rest of us? And please don't disappoint me by repeating some "war for oil" nonsense.

quote: Someone here at Anandtech had a great tagline years ago. It went something like this.... "You don't see alot of wealthy people clammoring to become poor to take advantage of the tax benefits" Makes alot of sense to me.

Awww that's cute. Plebeian socialist nonsense that has no bearing on anything. All that crap does is pit one class of Americans against the other. I wish we would stop doing this.

I guess I'm crazy. I still believe that people can rise up in this country, and that the Government has no moral claim to our earnings. But since unfortunately the "temporary" income tax is never going away, we should all be paying as little as possible.

quote: Where is the "massive spending cuts" party?

The Tea Party? You know, Conservative Republicans. But good luck winning an election when so many millions of Americans are now dependent on the entitlement state.

Chris Rock gave a perfect example regarding alimony and OJ Simpson. Roughly quoting if you make $20 million and she gets 1/2, you aren't starving, but if you make $30K a year and she gets 1/2....you may have to kill her.

Same concept here, sure the GE's of the world can afford a higher percentage, but the $50K a year houshould barely holding on cannot go from a EIC refund every year to a 25% bill. It would be disasterous for those under the poverty line, and would cause several above it to fall below.

These people clearly don't care about that. They just want to punish the rich, no matter what the consequences or effect.

A tax policy clearly based in emotional rhetoric. Sounds like a great plan, right?

Why even monkey around with the tax code? They could achieve their objective more soundly through legislation. Just push a bill through Congress, and of course Obama would sign it, that nobody can net more than $1mil a year. And that every dollar after 1$million is automatically garnished and sent to the IRS. BAM! Problem solved.

It seems like about 80% of the people here would actually support that.

quote: Once you understand that the top 10% earners pay 70% of the total tax burden

Nice spin. whenever this to cited it almost always excludes the why they "shoulder" that burden. which is because the top 10% of earners OWN 80% of all the financial wealth in this country! So, given that, shouldn't they be shouldering 80% of the tax burden?

You literally think people choose to be poor. Congratulations for being a terrible human being. Have you ever worked a retail or fast food job in your life? People working those jobs work FAR harder than some stiff pushing papers around making twice as much as they do. Success in this country has never about how hard you work, that's a Horatio Alger-esque myth perpetuated by wealthy people to divide Labor and ensure that they work harder. They say, "if you work hard, maybe one day you could be like me!" while neglecting to mention that they inherited their wealth from Daddy or Mommy and haven't done a damn thing in their life except leech off of society. Republicans and their ilk complain about welfare queens, when its the wealthy that leech far more from the government and society than the poor do. Privatize the profits, socialize the losses, that's been the Modus Operandi of corporations in this country for the last 30 years.

And if you want to go Galt and leave America because your taxes went up, don't let the door hit your ass on the way out. The last thing this country needs are more self-righteous, privileged assholes like you.

quote: Have you ever worked a retail or fast food job in your life? People working those jobs work FAR harder than some stiff pushing papers around making twice as much as they do.

Yes let's start paying fry cooks and dishwashers $100,000 a year. I'm sure that wont cause an insane spike in the cost of food and other goods at all! The employer will just eat those costs and NOT pass them on to the population.

And to answer your question, of course I have. I still work hard. Don't hand me this working class hero crap, I am NOT a privileged person by any means. And I'll tell you one thing, putting myself through college and paying off all these goddamn loans were far harder than ANY fast food or warehouse job I've ever done. But it was worth it. Because now I don't HAVE to do those jobs anymore. There's a difference between a job and a career, moron.

Nobody told you to "work hard". Nobody took from you. Nobody gets rich working in fast food and everyone knows that. If that's as high as you aspire to be, that's all you'll EVER be! Your ideas are bitter, pathetic, and hateful. And you have the nerve to call me an asshole?

Thank you for being the poster child of the class warfare arguments I've been talking about. I couldn't have put such self-defeatist and vapid viewpoints down if I sat here and tried all day.

And the reason why there is capital flight is because the government makes it an unfriendly environment for businesses to do what they are appointed to do (make money for their shareholders).

Sure, our government can tax them to hell until they have zero corporate profits but then they don't have money to give back to their shareholders and no money to reinvest into research and development.

With a cycle like that, they would soon become noncompetitive and be forced out of the market.

Why do companies like Microsoft and Apple keep on making amazing products? Because they have enough money hire the best employees and reinvest into the ideas/products of tomorrow.

The purpose of a corporation isn't to make a cash cow so that the government can keep on functioning with a budget (like ours has done for the past 3 years).

Like it or not, other countries will have different tax rates and regulations and corporations will always try to take advantage of that either domestically or abroad. It is up to our government to decide if they want to competitively tax them so that they will want to pay their taxes here rather than to some foreign government.

You're talking to a brick wall. These people do not believe in capitalism and that corporations reinvest anything. It's all greed this, money hoarding that, bla bla rhetoric, class warfare, jealousy.

quote: The purpose of a corporation isn't to make a cash cow so that the government can keep on functioning with a budget (like ours has done for the past 3 years).

Well you have to understand how their side looks at this. Their conviction stems from a worldview comprised of:

1) the idea that the government actually owns every penny a person earns and they only allow people to keep so much (basically, they read tax rates in reverse, if someone has a tax rate of 25%, to big-government types, it doesn’t mean that the government gets 25% of their income, rather, it means that the government gives them back 75% of what they earned) and;

2) that the rich should pay progressively more in taxes so that the government has more money (because the government is the only entity that actually creates jobs).

If it were up to liberals, the wealthiest Americans would still be turning over 91% of their income to the federal government (or maybe only 70%, after JFK’s tax rates).

They earned their money. They don't "control" all the money. A fairy didn't decide to pick them above someone else with magical rich dust. Most people are rich because they worked damn hard for it or made better/different choices in life, and I'm sorry you people cannot accept that and hate them for it.

quote: So, given that, shouldn't they be shouldering 80% of the tax burden?

"If you look at the last five years, if you look at what major innovations have occurred in computing technology, every single one of them came from AMD. Not a single innovation came from Intel." -- AMD CEO Hector Ruiz in 2007